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ARTICLE · 08 JULY 2013

Obtaining Corporate Authority Fundamentals Saves Loan Transaction

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The Officer’s Certificate and the Directors Resolution are often viewed as formalities in corporate loan transactions that attract very little time or attention.

CanadaFinance and Banking
Richard Dusome
Richard Dusome
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The Officer's Certificate and the Directors Resolution are often viewed as formalities in corporate loan transactions that attract very little time or attention. However, a recent Ontario case confirms the importance for lenders to routinely obtain these corporate authority fundamentals.   

In Wallerstein1, Business Development Bank of Canada ("BDC") was able to rely upon these documents when the validity of a loan transaction was contested by a minority shareholder for non-compliance with a unanimous shareholders agreement (the "USA").

The plaintiff in Wallerstein was a minority shareholder of 2161375 Ontario Inc. ("216"), to which BDC had extended loans and taken a general security agreement to secure the repayment of those loans. She sought a declaration setting aside any loan liability of 216 to BDC on the basis that she had not authorized the transaction, and a further declaration that the other shareholders were wholly responsible for any liability to BDC

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